Use the following information for questions
Ling Company had the following transactions during 2011:
$\bullet$Sales of ¥9,000 on account
$\bullet$Collected ¥4,000 for services to be performed in 2012
$\bullet$Paid ¥1,250 cash in salaries
$\bullet$Purchased airline tickets for ¥500 in December for a trip to take place in 2012
-What is Ling's 2011 net income using cash basis accounting?

Question

Use the following information for questions 
Ling Company had the following transactions during 2011:
$\bullet$Sales of ¥9,000 on account
$\bullet$Collected ¥4,000 for services to be performed in 2012
$\bullet$Paid ¥1,250 cash in salaries
$\bullet$Purchased airline tickets for ¥500 in December for a trip to take place in 2012
-What is Ling's 2011 net income using cash basis accounting?

Quizplus · Accepted Answer

Under cash basis accounting, revenue is recognized when cash is received, and expenses are recognized when cash is paid. Ling Company received ¥4,000 in cash for future services and paid ¥1,250 in salaries. Therefore, the net income is ¥4,000 - ¥1,250 = ¥2,750. However, the purchase of airline tickets is not an expense for 2011, so it is not included in the calculation.

Use the Following Information for Questions Ling Company Had ∙\bullet∙

Use the Following Information for Questions
Ling Company Had $\bullet$